Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2021 Supreme(Guj) 466

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
VIKRAM NATH, BIREN VAISHNAV, JJ.
M/S FIVE STAR AGRICO PVT. LTD. - Appellant
Versus
UNION OF INDIA - Respondent
SPECIAL CIVIL APPLICATION NO. 10600 of 2020
in
CIVIL APPLICATION (FOR STAY) NO. 1 of 2021
With
SPECIAL CIVIL APPLICATION NO. 10461 of 2020
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2021
Decided On : 01-07-2021

Advocates Appeared:
For the Appellant : MR HARDIK P MODH
For the Respondent: MR NIKUNT RAVAL

Point of Law: Procurement of material. - The manufacturer or processor shall obtain the materials to be utilised in the manufacture of the finished goods intended for export directly from the registered factory in which such goods are produced, accompanied by an invoice under rule 11 of the Central Excise Rules, 2002

Headnote:
Constitution of India,1950 - Article 226 - Central Excise Act, 1944 - sub-section (1) of Section 5A - Finance Act, 2001 - Section 136 - Finance Act, 2003 - Section 169 - Finance Act, 2004 - Section 3 - Finance Act, 2003 - Section 157 - Petitioners are engaged in manufacturing and export of various kinds of hand tools - Partnership Firm - Agriculture, horticulture and forestry - Whether such scrap was liable to payment of duty on its clearance - Whether they are liable to pay duty on the clearance of scrap - whether there was any requirement of fulfillment of the condition 4(c) of the notification - Special Civil Application and the facts of the other case are also similar except for the change in the dates. petitioner is said to have made a written request to Department of Central Excise vide communication to clarify as to whether they are liable to pay duty on the clearance of scrap - Petitioner received response from the Department under the signature of respondent No.4 – Deputy / Assistant Commissioner of CGST, Division- Gandhinagar, Ahmedabad-III that not only final product manufactured by the petitioner were fully exempted from payment of Central Excise duty, but also the waste and scrap arising as a result of the manufacture of said final product was unconditionally fully exempted under the Notification issued under Section 5A of the Central Excise Act, 1944 –
Finding of the Court:
Department has sought to argue that Department has rightly rejected the rebate claims and that requirement of paragraph 4(c) of the notification being not fulfilled and being fully applicable in the case of the petitioner, the petitions deserve to be dismissed could not show us from either the order in original passed by the adjudicating authority or the appellate or the revisional authority that the material as such or partially processed was moved outside the factory - Department further submitted that the petitioner was liable to pay excise duty on the clearance of the scrap and the only exemption granted was for the finished products - He could not show from the order in original or from appellate order or revisional order that apart from non-fulfillment of conditions of paragraph 4(c) of the notification - Having considered the submissions and having perused material on record – Court find substance in the submissions advanced by Shri Modh, learned counsel for the petitioner. A clear reading of paragraph 4 to become applicable conditions sine quo non was the material as such or at partially processed stage had to be moved outside the factory and only and only then paragraph 4 and its sub-paragraphs –
Result: Petitions are allowed

ORDER :

VIKRAM NATH, J.

1 These two petitions have been filed under Article 226 of the Constitution of India praying for a writ of certiorari for quashing the order passed by respondent No.2 – Principal Commissioner of Revisonary Authority & Ex-Officio Additional Secretary to the Government of India dated 15.01.2020 upholding the order in appeal dated 05.12.2013 confirming the recovery of rebate claims already sanctioned, in effect rejecting the rebate claims filed by the petitioners in the month of May, 2013 vide order dated 30.07.2013. Other ancillary reliefs have also been claimed.

2. The petitioner in Special Civil Application No.10461 of 2020 is a Partnership Firm, whereas in Special Civil Application No.10600 of 2020 the petitioner is the Private Limited Company incorporated under the Companies Act, 1956. Both the petitioners are engaged in manufacturing and export of various kinds of hand tools viz. spades, shovels, picks, hoes, etc. used in agriculture, horticulture and forestry. These goods manufactured by the petitioner are exempted from the Central Excise duty leviable thereon under Notification No.41/2001-CE (ET) dated 26.06.2001 [superseded vide Notification No.23/2004-CE dated 09.07.2004 and thereafter vide Notification No.05/2006-CE dated 01.03.2006 (superseded vide Notification No.12/2012-CE dated 17.03.2012) issued under sub-section (1) of Section 5A of the Central Excise Act, 1944. In both the petitions, there is no issue regarding the exemption of the whole of the Central Excise duty on the manufactured goods, which would be exported. The issue involved in the petitions relates to the scrap generated in the manufacture of the hand tools as stated above as to whether such scrap was liable to payment of duty on its clearance.

3. The facts are taken from Special Civil Application No.10461 of 2020 and the facts of the other case are also similar except for the change in the dates. The petitioner is said to have made a written request to the Department of Central Excise vide communication dated 03.05.2005 to clarify as to whether they are liable to pay duty on the clearance of scrap. The petitioner received response dated 17.06.2005 from the Department under the signature of respondent No.4 – Deputy / Assistant Commissioner of CGST, Division- Gandhinagar, Ahmedabad-III that not only the final product manufactured by the petitioner were fully exempted from payment of Central Excise duty, but also the waste and scrap arising as a result of the manufacture of the said final product was unconditionally fully exempted under the Notification No.89/95-CE dated 18.05.1998 issued under Section 5A of the Central Excise Act, 1944.

4. The petitioner accordingly filed 335 rebate claims in respect of the Central Excise duty paid on raw-materials used in the manufacture of goods exported during the period from 2008-09 up to 2012-13 under Rule 18 of the Central Excise Rules, 2002 (for short, 2002 Rules) read with Notification No.21/2004-CE(NT) dated 06.09.2004 and such rebate claims were sanctioned by the respondent No.4 by various orders in original passed from time to time. Although a show cause notice dated 10.05.2013 was issued proposing to cancel the sanction of the 335 rebate claims but the same was later resolved and sorted out.

5. In the meantime, the petitioner had exported the finished goods and had filed 57 rebate claims for the period from May, 2013 in respect of Central Excise duty paid on the raw-materials used in the manufacture of exported goods under the provisions of Rule 18 of the 2002 Rules read with notification dated 06.09.2004. These rebate claims were rejected vide order in original dated 30.07.2013 on the premise that the petitioner failed to fulfill the condition No.4(c) of the Notification No.21/2004-CE inasmuch as the waste / scrap had not been cleared on the payment of duty. The order in original dated 30.07.2013 and 21.08.2013 were challenged by way of appeals before the Commissioner (Appeals), which came

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